Understanding the Bearish Signals in This Chipmaker's Stock Chart

Intel Corporation’s (INTC) shares plunged nearly 31% in April, marking their worst month in more than two decades, as the prominent chipmaker continues to grapple with executing a turnaround. Moreover, the stock has dropped approximately 40% year-to-date.

Most of INTC’s sell-off occurred after its recent financial results, which included a bleak forecast, indicating that the company’s turnaround efforts will require more time and investment. Further, Intel’s factory operations faced challenges in March, adding to investor concerns.

Mixed First-Quarter Earnings and Weak Forecast

During the first quarter that ended March 30, 2024, INTC’s net revenue increased 8.6% year-over-year to $12.72 billion. However, that missed analysts’ estimate of $12.78 billion. Also, the company’s Foundry business reported $4.40 billion in revenue, down 10% year-over-year.

The chipmaker’s gross margin rose 30.2% from the prior year’s quarter to $5.22 billion. Its operating loss was $1.07 billion, compared to $1.47 billion in the previous year’s period. However, Intel Foundry posted a $2.50 billion operating loss during the quarter. In 2023, this unit reported a hefty operating loss of $7 billion.

Furthermore, INTC’s net income came in at $437 million versus $2.77 billion in the same quarter of 2023. Also, the loss per share attributable to Intel was $0.09, compared to $0.66 in the prior year’s quarter. That surpassed the consensus loss per share estimate of $0.15.

Intel’s primary business remains manufacturing chips for PCs and laptops, categorized as Client Computing Group (CCG). This business unit revenue amounted to $7.50 billion, a 31% increase year-over-year.

In addition, Intel produces central processors for servers and other components and software, which are classified under its Data Center and AI business segment. Sales in this segment rose by 5% year-over-year to $3 billion. However, the chipmaker faces stiff competition in the server market, particularly against AI chips from companies like NVIDIA Corporation (NVDA).

In addition, for the second quarter of fiscal 2024, the company expects its revenue to come between $12.5 billion and $13.5 billion. It projects a loss per share of $0.05 for the current quarter, and its non-GAAP earnings per share are expected to be $0.10.

INTC recently revised its current-quarter revenue guidance after the U.S. Department of Commerce revoked certain export licenses intended to send its chips to the Chinese tech company Huawei.

On May 7, the chipmaker said in an 8-K filing with the SEC that it had received a notification from federal regulators that they were “revoking certain licenses for exports of consumer-related items to a customer in China, effective immediately.”

On Wednesday, Intel announced that due to the Commerce Department's directive, it expects revenue for the second quarter to fall below the midpoint of the original range of $12.5 billion to $13.5 billion. However, the company continues to expect full-year revenue and earnings to be higher than in 2023.

Intel Faces Fierce Competition

INTC, a longstanding leader in the semiconductor industry, has been facing rigid competition from rivals, including Advanced Micro Devices, Inc. (AMD) and Nvidia. Intel remains dominant in the PC chip market, but AMD is gaining ground in server, desktop, and mobile segments, as per the latest figures from Mercury Research.

Intel remains the leading player in the server CPU segment, with a market share of 79.2% during the first quarter; however, this is down from 82% in the year-ago quarter, indicating some erosion in its market share. On the other hand, AMD made gains in this segment, rising from just 18% a year ago to 23.6% in the first quarter of 2024.

Also, Intel's market share in the mobile CPU segment was 80.7% in the first quarter of 2024, compared to 83.8% in the prior year’s quarter. However, AMD’s 19.3% market share in the first quarter was 3.1% up from the same period in 2023. Further, AMD gained on Intel, with its 23.9% desktop share in the fiscal 2024 first quarter, up 4.7% a year ago.

Besides, INTC continues to fight for server market share against competitor NVDA, particularly in AI chips. Nvidia commands around 80% of the AI chip market with its graphics processors (GPUs), which AI builders have favored over the past year.

Earlier in April, Intel introduced its latest AI chip, Gaudi 3, as competition from NVDA intensified. The company claimed the new Gaudi 3 chip is over twice as power-efficient and can run AI models 1.5 times faster than Nvidia’s H100 GPU. Also, it is available in various configurations, such as a bundle of eight Gaudi 3 chips on a single motherboard or a card designed to fit into existing systems.

Intel tested the chip on models like Meta's open-source Llama and Falcon, backed by Abu Dhabi. It highlighted that Gaudi 3 could be instrumental in training or deploying models, including Stable Diffusion and OpenAI’s Whisper model for speech recognition.

Also, Intel is losing market share to rivals such as Arm Holdings PLC (ARM), Samsung Electronics, and Taiwan Semiconductor Manufacturing Ltd. (TSM).

Analysts Lowered Price Targets for Intel Shares

Goldman Sachs analysts slashed their price target for INTC stock from $39 to $34 and lowered their adjusted EPS estimates for the 2024-2026 period by an average of 18%. Also, they reaffirmed their “Sell” rating for the stock, which has been in effect since July 2020.

“We worry the company will continue to cede wallet share within the overall Data Center Compute market to the likes of Nvidia and Arm,” Goldman analysts said.

Meanwhile, Bank of America Corporation (BAC) cut its price objective to $40 from $44, citing higher costs, lower growth, and fierce competition. According to BofA analysts, the bleak second-quarter revenue guidance highlights that “topline growth remains lukewarm on limited AI exposure, while underutilized manufacturing and elevated costs.”

They added that Intel’s “enterprise incumbency, US-based manufacturing assets and weak investor sentiment provide turnaround potential.”

Bottom Line

INTC’s first-quarter 2024 earnings surpassed Wall Street’s expectations for EPS but fell short on sales. The chipmaker also provided a weak forecast for the current quarter.

After the U.S. Department of Commerce recently revoked certain licenses for exports of chips to Huawei in a bid to curb China’s tech power, Intel revised its second-quarter revenue guidance, anticipating below the initial range of $12.5 billion to $13.5 billion.

INTC’s stock fell more than 30% in April, making its biggest decline since June 2002. Moreover, the stock is trading below its 50-day and 200-day moving averages of $38.33 and $39.74, respectively, indicating a downtrend.

Despite INTC’s more than 50 years of dominance in the semiconductor industry, it now faces intense competition from competitors like AMD, NVDA, TSM, Samsung, ARM, and more. Also, the ongoing AI boom has caused a shift in enterprise spending away from Intel’s traditional data center chips.

With limited AI exposure, the intensifying competition raises doubts about Intel’s future dominance in the semiconductor industry.

INTC’s CEO Pat Gelsinger told investors on an earnings call to focus on the company’s long-term potential.

Analysts expect INTC’s revenue to increase marginally year-over-year to $13.06 billion for the second quarter ending June 2024. However, its EPS for the current quarter is expected to decline 18.2% year-over-year to $0.11. For the fiscal year 2024, the chipmaker’s revenue and EPS are expected to grow 3.3% and 4.8% year-over-year to $55.99 billion and $1.10, respectively.

“While 2024 should mark a bottom in many aspects of the business, the pace of the climb back up is unlikely to remain unclear,” Stifel stated in a note to clients.

Given INTC’s disappointing revenue guidance, regulatory issues, and fierce competition, it could be wise to avoid investing in this stock now.

AI 2024 Outlook: Which Stock Holds the Edge – INTC or NVDA?

The AI landscape evolved significantly, thrusting it into the limelight for leading technology firms with the introduction of OpenAI’s ChatGPT. Before this advanced language model-based chatbot was unveiled, AI was certainly explored and considered by tech enterprises, but seldom was it prioritized. However, now, unwavering optimism about the burgeoning potential of AI continues to pervade organizations.

As we bid adieu to 2023 – notably marked by the ascendancy of AI – queries linger regarding the monetization strategies businesses will employ around this transformative technology. However, amid the clouds of uncertainty, one fact stands crystal clear – AI is here for the long haul, advancing at a stupendously swift pace.

NVIDIA Corporation (NVDA), a leading force in the semiconductor realm, has secured an iron-clad position in the AI arena thanks to its timely engagement with AI technologies. This strategic move has propelled NVDA years ahead of its competitors, enabling it to provide a comprehensive platform catering to all AI requisites – from advanced chips and processors to complex software systems.

Intel Corporation (INTC), distinguished for trailblazing semiconductor innovation and globally esteemed for its Central Processing Units (CPUs), fuels a myriad of devices spanning personal computers to expansive data centers. INTC's Core processors are applauded for their exceptional performance and unwavering reliability. In a recent turn of events, INTC has plunged into the AI sphere with products like the AI-specialized Core Ultra and server CPUs like Emerald Rapids.

The global AI market is expected to reach $1.35 trillion, growing at a 36.8% CAGR. It would be strategically amiss for INTC not to stake its claim. However, the extent of INTC's share within this booming market hinges upon factors like the raw processing capacity, the versatility of the tech, and the number and diversity of potential applications for its semiconductor chips.

Relations between INTC and NVDA have soured following the "AI Everywhere" event, as a harsh critique from INTC's CEO Pat Gelsinger has elicited retaliatory remarks. The dispute originated when Pat Gelsinger criticized NVDA's AI strategy as being "shallow and small." This sparked a skirmish of words between the two tech titans, relentlessly escalating since then. The wrangle fueled up when INTC suggested that NVDA's status in the sector was simply due to “luck,” provoking a robust response from the graphics giant.

NVDA reacted defensively to INTC's comments, vehemently denying the ‘luck’ factor in their success. Bryan Catanzaro, NVDA's Vice President and previously involved with INTC's discontinued Larrabee project, took to the internet to express his views. He pointed to INTC's failure to capitalize on the rising AI trend as evidence of their lack of "vision and execution."

During the "AI Everywhere" event, INTC unveiled numerous innovative products and provided updates on their product pipeline. The highlight of the event was the introduction of the Gaudi 3 accelerator. However, Meteor Lake, an AI-optimized Core Ultra, and Emerald Rapids for cloud applications were also unveiled along with new chipsets, underscoring INTC’s commitment to fostering an extensive AI ecosystem.

It is reported that Gaudi 3 could outperform NVDA’s H100 accelerator, the current top choice for companies developing sizeable chip farms to power AI applications, despite NVDA is yet to launch its latest high-end AI chip.

Stepping into the booming AI market with gusto, INTC’s latest offerings include an upgraded version of Xeon server chips – marking the chips’ second major update in less than a year. These chips are designed to propel INTC to the pinnacle of AI innovation by offering improved performance and memory capabilities with lower electricity consumption.

INTC posits that the Xeon is the only mainstream data center processor with built-in AI acceleration. The company's 5th Gen Xeon delivers up to 42% higher inference and fine-tuning on models boasting up to 20 billion parameters.

Let’s look at the different approaches to AI processing…

At present, divergent strategies toward AI processing are being implemented by INTC and NVDA. NVDA's CUDA puts more emphasis on educating AI from the ground up. It involves supplying the AI model with data to let it learn – akin to educating an individual to achieve the necessary qualifications required for a job.

On the other hand, INTC leans more toward "inference." In this approach, a pre-existing AI model adapts and acquires knowledge from an unfamiliar situation. This could be likened to assigning a task relevant to their field to someone armed with the necessary degrees but lacking experience, then observing how they apply their theoretical knowledge in a practical situation.

Probable Impacts of Approaches on the Broader AI Industry in 2024…

NVDA’s CUDA is a software platform API facilitating parallel computing with GPU hardware. This breakthrough solution simplifies the process for developers, allowing them to create software that accelerates tasks by distributing workloads across parallelized GPUs.

CUDA has proven instrumental in driving pioneering advancements within various AI sectors. Thanks to the computational firepower harnessed from CUDA, researchers can train increasingly complex models, manage larger datasets, and achieve best-in-class results in record-breaking time.

The AI industry widely embraces CUDA for various applications, including deep learning, robotics, computer vision, and natural language processing. The platform will continue to evolve, underpinning new architectures such as NVDA's Hooper and Ada Lovelace. These innovations promise cutting-edge Tensor Cores and Transform Engines, advanced memory management capabilities, and more.

CUDA’s potential lies in boosting the performance and effectiveness of AI applications through the exploitation of GPU’s powerful parallelism and high bandwidth. For instance, it allows deep learning models to run faster on GPUs rather than CPUs or cloud servers.

Using CUDA, AI researchers and developers gain access to the enormous computational capacities of GPUs. This enables the training and deployment of AI models at revolutionary speeds, improving the efficiency of AI algorithms and decreasing the time necessary for model development and deployment. This acceleration empowers greater innovation in the field.

INTC’s Inference is the process used for making predictions through a trained model to make a prediction. The company's primary focus is vested in the inference market. Gelsinger commented in the event, “As inferencing occurs, hey, once you’ve trained the model … There is no CUDA dependency. It’s all about, can you run that model well?”

This evolving realm presents considerable competition for INTC. Nevertheless, the firm’s leadership considers the inference market to be a thriving ground for the future. The inference model aims to provide momentum to the expansive AI market by promoting cost efficiency and deployment of AI models across diverse platforms and devices. This would result in stimulating innovation and fostering collaboration among numerous stakeholders within the AI ecosystem.

With the adoption of AI reaching unparalleled heights, the demand for ground-breaking methods to train these AIs will be vital to conserve time and resources. While it is premature to conclude whether INTC's strategy will outmaneuver CUDA, the recent launch of INTC's Meteor Lake CPUs featuring an integrated Neural Processing Unit (NPU) reflects the firm's determination to incorporate AI profoundly into its products.

We shall now delve into some other factors to ascertain which stock holds an advantage:

Past and Expected Performance

NVDA’s revenue has grown at 44.8% and 29.3% CAGRs over the past three and five years, respectively. Its tangible book value has increased at CAGRs of 49.4% and 25.7% over the same periods.

On the other hand, INTC has yet to translate to top-line improvement, as its revenue has shown negative CAGR growths of 12.2% and 5.3% over the past three and five years, respectively. However, its tangible book value has increased at CAGRs of 22.5% and 14.6% over the same periods.

Analysts expect NVDA’s EPS for the fiscal year ending January 2025 to reach as high as $19.94 from the $12.30 expected in Fiscal 2024 (ending January 2024). For the fiscal year ending January 2024, NVDA’s revenue is expected to reach $58.77 billion, up 117.9% year-over-year, while for the fiscal year 2025, analysts expect its revenue to reach $90.66 billion. For the fourth quarter, the company expects its revenue to be $20 billion, plus or minus 2%.

Analysts expect INTC’s revenue for the fiscal year (ending December 2023) to come in at $54.07 billion, indicating a decline of 14.2% year-over-year. The consensus EPS estimate of $0.95 for the ongoing year indicates a 48.2% year-over-year decrease. For the fiscal year ending December 2024, its revenue and EPS are expected to increase 13% and 100% year-over-year to $61.10 billion and $1.91, respectively.


NVDA’s net revenue for the fiscal third quarter ended October 29, 2023, increased 205.5% year-over-year to $18.12 billion. Also, its non-GAAP net income and non-GAAP EPS came in at $10.02 million and $4.02, up 588.2% and 593.1% year-over-year, respectively.

During the fiscal third quarter that ended September 30, 2023, INTC’s revenue amounted to $14.16 billion, down 7.7% year-over-year. Its net income came at $297 million, while non-GAAP EPS increased 10.8% year-over-year to $0.41.

Bottom Line

NVDA showcases remarkable potential in the AI field, reaping significant profits from the sector. However, despite impressive revenue growth in the last quarter, boosted by a surge in AI GPU sales, NVDA continues to grapple with intricate macroeconomic difficulties. Sustained export limitations have negatively impacted sales to organizations in countries like China. Given the present regulatory environment, NVDA foresees a significant downturn in sales.

As the U.S. intensifies its export control measures, NVDA is proactively working to develop chips tailored for the Chinese market. However, the U.S. is expected to tighten these controls even more tightly to curb strides in new technologies that could favor Beijing.

A delay in the deployment of chips specifically optimized for China's market has resulted in an NVDA stock dip over the last month. While the recent slide may seem like an attractive investment opportunity, investors must be mindful of the possibility of further short-term volatility.

It is crucial to note that NVDA shares are currently trading at 20.59x sales and 39.83x earnings; valuations that imply any missteps have the potential to affect the company's market position significantly. Given the ongoing market instability and associated risks, it may be judicious for prospective investors to wait for a better entry point into the stock.

A notable concern for INTC stems from its primary focus as a PC hardware entity. Evidenced by the 2021 historic surge in PC sales, mainly attributed to COVID-19 and a rising interest in PC gaming, INTC relayed a substantial dependency on this market.

However, as we navigate into 2023, the PC market has dramatically retrenched compared to the extraordinary circumstances of 2021. Adding insult to injury, it appears NVDA has been outpacing INTC within the data center arena since the launch of ChatGPT.

An emergent trend of building accelerated computing server instances and a marked preference for H100 GPUs has seen a decline in the demand for CPU-heavy, compute-optimized instances. This act has placed INTC in a challenging position since the Xeon processors, once a market favorite, are now struggling to find takers.

While INTC's Gaudi has indeed enhanced AI/ML performance to a certain degree, there's no denying its noticeable lag behind NVDA. The comparative analysis drawn from third-party benchmarks and NVDA's unprecedented winning streak at the last MLPerf inference and training benchmarks only reinforces this fact.

INTC certainly boasts commendable computing expertise and continues its endeavors to gain mastery in process technology. Alas, Critics argue it has been sluggish in its execution compared to its counterparts. Rising costs associated with fabrication work and a tarnished reputation – being labeled as expensive, slow, and difficult to collaborate with – have acted as further impediments to its growth. Nevertheless, currently, INTC appears confined to providing chip fabrication services for ARM chips to fabless chip designers.

In the escalating war of AI technology where INTC and NVDA stand head-to-head, the future remains uncertain. With NVDA leading in graphic card technology and INTC's innovative Meteor Lake processors becoming game-changers in laptop technology, it's safe to say the ultimate victors of this clash will unquestionably be the hardware enthusiasts.